Fleet Management to “Cronies”?

The Star reported on Jan 27 that the government had selected a consortium comprising the Naza and Berjaya conglomerates for a 15-year contract to supply, maintain and manage its fleet of official cars and police patrol vehicles. Citing sources, The Star said the consortium had received a letter of intent from the Ministry of Finance (MoF). The actual awarding of the contract would take place sometime in June. 

The Malaysian Reserve (TMR), sighting a document on April 22 last year, said the government had estimated to use between 1,600 and 2,730 vehicles for the next six years. Among the vehicles listed are Proton marques X70, Persona and Saga as well as the Accord and Vellfire. The government, according to TMR, is expected to fork out RM220 mil annually on the fleet of cars but is looking to trim that cost.

The previous concessionaire, Spanco Sdn Bhd, ran the government’s fleet management service for 25 years. Its accounts, however, are hidden from the public as Spanco is registered as an exempt private company. 

So is the new contract to cronies? And what exactly is a crony?

In 1982 Mancur Olson in his book “The Rise and Decline of Nations”, described an economy defined by the relationship between interest groups seeking favours from the government. This was misleadingly termed as “crony capitalism”. It has little to do with capitalism, according to Todd Zywicki, Professor of Law at George Mason University. It is perhaps more accurate to say that it is as “corporatism” – a system where business (privately owned) but comprehensively interlinked with government and where government uses private industry directly or indirectly to accomplish preferred political goals. Regardless, Olson’s description of the symbiotic relationship of “crony capitalism” has stuck in the minds of the public.

The engine of crony capitalism is the process known as “rent-seeking”. The term coined by economist, Gordon Tullock to describe well-organised interest groups that pursue government favours. And rent-seeking happens in three ways – direct, indirect or extraction. More of that in another article!

Meanwhile, ponder on U.S. Government support or bail-out of Chrysler, GM, the banks (2008), Fannie Mae, Freddie Mac, AIG, Exxon, Big Pharma and many others over the years. Is this crony capitalism? It sure wasn’t the workings of a free market!

References:

1. Has the government rewarded RM3.3bil over 15 years to cronies? Emmanuel Samarathisa, Focus Malaysia

2. Government picks Naza-Berjaya for fleet management job, Izwan Idris, The Star,
27 Jan 2020